I am limited partner is some public traded partnerships/MLPs. When you fill K1, after all boxes interview K3 and box 1-20 question there are few questions, Describe the partnership.
Q1: I have passive activity losses carried over from last year
I checked yes as there are losses shown on K1 worksheet.
Q2: All of my investments in this activity is at risk?
I also checked yes, as partnership can go to Zero value.
Q3: I have at risk losses carrying over from 2021
Not sure about this one. I did talk to Turbo Tax CPA, and she said check Yes to that one. At that time by checking it did NOT change my taxes. I did Not pay attention to worksheet numbers. This one box did some issues, I think.
Q4: I personally paid Health insurance and long term (Health include dental)
I check that one yes as well as i did pay my own health insurance. Again turbo tax CPA told me to check yes but it did not change my taxes.
Issue is coming in K1 worksheet ( Section A, Passive Activity Adjustment to Income/loss Page 3 and Page 4 for AMT.
Let go back to 2021 return for same MLP.
For 2021 year gain/loss was ($ -10000, this number is Box 1 of K1 from Ordinary Business Income/loss) and suspended loss was from prior years ($-20000) = Loss suspended for current year = ($-30000). There numbers are made up for example only. For year 2021 and earlier I NEVER checked YES to box 3 and box 4 question mentioned in the top.
Now for 2022 I did check yes to Box 3 and Box 4 (describe the partnership) on advice of turbotax CPA.
In 2022 MLP produced ($-5000, Box 1 of K1) and I have carry over of ($-30000)
now software did sort of something new.
This is in worksheet of K1, page 3
It is showing ($-35000) as gain/loss limitation column and next column is suspended loss carry over as ($-30000) = Loss suspened for current year = ($-65000)
I think it was due to checking YES to earlier question Q3: I have at risk losses carrying over from 2021
At that time it did NOT change my tax amount so did not pay much attention to worksheets.
Issue is
I sold this partnership in 2023. My understanding is source of this Ordinary income/loss for MLP is depreciation so at time of sale it is sort of reversed to show value which is reported on Final K1 as Gain subject to recapature as ordinary income. My understand is usually these number sort of close to each other.
Due to this error this extra loss (almost 30k!) and it is reducing my income on Sch 1 of 1040 on my 2023 return.
What are my options?
